The Great Eastern Holdings AGM, which was held on April 21, had a different atmosphere about it, according to a shareholder who was present. Around four or five young investors asked whether the GEH board would consider linking management remuneration to share price through GEH stock options. Currently, GEH’s management is rewarded with Oversea-Chinese Banking Corp stock options.
This is because management’s KPI is focused on embedded value (EV) and new business embedded value (NBEV), the young investors said. Hence the management is not incentivised to increase total shareholder returns and shareholder value, the young investors opined. The share price is consequential, they added.
In a response to questions posted on the SGX, GEH’s management said as part of the OCBC Bank franchise, a substantial part of the Group’s business is done in collaboration with OCBC Bank. Hence, granting our executives shares in OCBC Bank would align our interests with that of the larger OCBC Group, the GEH management answered. This, to the young investors, is not a reply.
“Great Eastern has been able to derive many benefits, such as access to a dedicated Bancassurance channel and significant cost efficiencies,” GEH’s management said. “We believe that if we continue to grow and perform well, investors will eventually recognise this through our share price. This has motivated us to work harder and continue to perform better.”
Interestingly, in an OCBC release posted on the SGX, OCBC had a question from an OCBC shareholder asking if OCBC would consider distributing all its GEH shares to OCBC shareholders. “This will unlock value in OCBC shares. This will also provide more liquidity to the trading of GEH shares for possible inclusion into MSCI and STI indices,” the OCBC shareholder said.
OCBC’s reponse was that presently, there are no plans to distribute GEH shares to OCBC shareholders as GEH’s insurance business is one of OCBC’s three key business pillars.
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However, a GEH shareholder said he brought up the subject of a dividend-in-specie to Helen Wong, group CEO of OCBC, during the GEH AGM. The GEH shareholder believes that a dividend-in-specie of around 25% of GEH shares to OCBC shareholders would boost the liquidity of GEH which in turn would attract more investors. In his view, a dividend-in-specie would boost both GEH’s share price and OCBC’s share price. That in turn would boost the STI. It could even encourage other large insurance companies such as AIA or Ping An, or China Life to have a secondary listing in Singapore. Prudential’s liquidity on the SGX would also improve.
More insurance companies on the SGX would create a hub of sorts. Analysts would start to cover insurance companies, and have a greater understanding of how insurance companies work, of their different capital requirements and how this differs from bank capital, and so on.
According to a spokesman from GEH, the GEH shareholder asked CEO Wong how she sees the relationship between OCBC and GEH. The spokesman says Wong said it's a matter for the OCBC Board.
A dividend-on-specie of GEH to OCBC shareholders would be positive for the STI and could even help the index break out of its trading range. The index ended the week of Apr 17-21 at 3,321, up 19 points week-on-week.
